Merrimon v. Unum Life Ins. Co. of Am.

• Decision Date: 03 February 2012
• Docket Number: Docket No. 1:10–CV–447–NT.
• Citation: 52 Employee Benefits Cas. 2583,845 F.Supp.2d 310
• Parties: Denise MERRIMON and Bobby S. Mowery, Plaintiffs, v. UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — District of Maine

845 F.Supp.2d 310

52 Employee Benefits Cas. 2583

Denise MERRIMON and Bobby S. Mowery, Plaintiffs,

v.UNUM LIFE INSURANCE COMPANY OF AMERICA, Defendant.

Docket No. 1:10–CV–447–NT.

United States District Court, D. Maine.

Feb. 3, 2012.

Andrea Bopp Stark, Molleur Law Office, Biddeford, ME, Arielle Cohen, Stuart Rossman, Boston, MA, Fred Schultz, Greene & Schultz, M. Scott Barrett, Barrett & Associates, Bloomington, IN, Jeffrey G. Casurella, Law Office of Jeffrey G. Casurella, Atlanta, GA, John C. Bell, Jr., Lee W. Brigham, Bell & Brigham, Augusta, GA, for Plaintiffs.

Byrne J. Decker, Gavin G. McCarthy, William J. Kayatta, Jr., Pierce Atwood LLP, Portland, ME, for Defendant.

ORDER ON CROSS–MOTIONS FOR SUMMARY JUDGMENT AND CLASS CERTIFICATION

NANCY TORRESEN, District Judge.

I. INTRODUCTION

Plaintiffs Denise Merrimon and Bobby S. Mowery are beneficiaries of group life insurance policies administered by the Defendant, Unum Life Insurance Company of America (“Unum”). These policies are governed by the Employee Retirement Income Security Act (“ERISA”) and Maine state law. This case comes before the Court on the Plaintiffs' motion for partial summary judgment regarding Unum's liability for: (1) breach of plan provisions and fiduciary duty under ERISA, (2) breach of contract, and (3) breach of Maine's late payment statute, 24–A M.R.S.A. § 2436 (2010) (the “Late Payment Statute”). Unum files a cross-motion for summary judgment on these claims. For the reasons set forth below, the Plaintiffs' motion for partial summary judgment is GRANTED IN PART with respect to their ERISA claims and DENIED with respect to their breach of contract and late payment claims. Unum's motion for summary judgment is GRANTED with respect to the Plaintiffs' claims for breach of contract and breach of Maine's late payment statute, but DENIED IN PART with respect to Plaintiffs' breach of fiduciary duty claim under ERISA.

The Plaintiffs also move to certify a class of similarly-situated plaintiffs including a subclass of beneficiaries whose policies are protected by the Late Payment Statute. Certification of the general class is GRANTED. Because the Court has granted Unum's motion for summary judgment on Plaintiffs' Maine state law claims, and because the subclass was based on those claims, certification of the subclass is unnecessary and is therefore DENIED.

II. FACTUAL BACKGROUND

The parties do not dispute any of the following facts, which were set forth by each side in their respective statements of material fact. In 2001, Peabody Investments Corp. established group life insurance coverage through Unum for the benefit of its employees (“Peabody Policy”), and in 2003, St. Joseph's Hospital did the same (“St. Joseph's Policy”). Plaintiff Bobby S. Mowery was a designated beneficiary of a Peabody Policy, under which benefits of $62,300 were payable upon the death of his son. Plaintiff Denise Merrimon was a designated beneficiary of a St. Joseph's Policy, under which benefits of $51,000 were payable upon the death of her husband.

A. The Group Insurance Summaries of Benefits (“GISBs”)

The parties agree that the GISBs are in all respects the relevant documents in this case. They are the contracts agreed to by the employers and Unum, and they contain the relevant portions of these employers' ERISA plans. They were written by Unum to fulfill ERISA's requirements for summary plan descriptions. These GISBs contain two critical provisions governing when and how the beneficiaries will be paid upon the approval of a claim. The pertinent wording of the two policies is identical.

1. When Benefits Would be Paid

In a section of the GISBs entitled “WHEN WILL YOUR BENEFICIARY RECEIVE PAYMENT?” the GISBs stated: “Your beneficiary(ies) will receive payment when Unum approves your death claim.” Peabody Policy Summary of Benefits, p. 31 (Doc. # 33); St. Joseph's Policy Summary of Benefits, p. 30 (Doc. # 34).

2. How Benefits Would Be Paid

In a section of the GISBs entitled “HOW WILL UNUM MAKE PAYMENTS?” the GISBs provided:

If you or your dependent's life claim is at least $10,000, Unum will make available to the beneficiary a retained asset account (the Unum Security Account).

Payment for the life claim may be accessed by writing a draft in a single sum or drafts in smaller sums. The funds for the draft or drafts are fully guaranteed by Unum.

If the life claim is less than $10,000, Unum will pay it in one lump sum to you or your beneficiary.

Also, you or your beneficiary may request the life claim to be paid according to one of Unum's other settlement options. This request must be in writing in order to be paid under Unum's other settlement options.

Id. at p. 17 (Doc. # 33); id. at p. 11 (Doc. # 34). A glossary to both GISBs defined the term “Retained Asset Account” (hereinafter “RAA”) to mean “an interest bearing account established through an intermediary bank in the name of you or your beneficiary as owner.” Id. at p. 40 (Doc. # 33); id. at p. 47 (Doc. # 34). No particular rate of interest, or formula or index for calculation of the rate of interest for the RAA is specified in this section or anywhere within the GISBs.

B. Payment to Plaintiffs Mowery and Merrimon

Plaintiff Bobby S. Mowery's son died on or about September 23, 2007. On December 28, 2007, Mr. Mowery submitted a claim for death benefits, which was approved by Unum on January 4, 2007. That same day, Unum's contractor Open Solutions, Inc. (“OSI”) mailed to Mr. Mowery a Welcome Kit which included information about the RAA established in his name, an opening statement, and a book of drafts to access the funds in an account at State Street Bank (the “Bank”). The drafts could be written for any amount over $250. In the Welcome Kit, Unum stated that it would credit interest to the account at 1% per year beginning January 4, 2008. It also stated, “If at any time after your account is established the available balance in your account falls below $250, it will be closed automatically. The balance remaining in the account will be sent to you, together with any interest due, after the 5th day of the following month.”

Between January 12, 2008 and January 18, 2008, Mr. Mowery wrote out five drafts in the total amount of $62,304.51. He paid off his mortgage, two student loans, and the balance of the bill for his son's funeral, and then he transferred the balance of the account into his investment account. On February 5, 2008, because the account balance had fallen below the required minimum balance of $250, State Street Bank closed Mr. Mowery's account and sent him a treasurer's check in the remaining amount of $19.13. In total, Unum paid Mr. Mowery $62,323.64, representing the full principal benefit plus $23.64 in accrued interest.

Plaintiff Denise Merrimon's husband died on or about July 13, 2007. Ms. Merrimon first contacted Unum about the death benefit due to her on August 3, 2007. Unum approved Ms. Merrimon's claim on September 10, 2007. Although Plaintiffs do not press the issue, Unum has explained that it did not immediately approve Ms. Merrimon's claim because it lacked the required claim form, death certificate, and beneficiary designation form. Unum further explained that it contacted St. Joseph's Hospital several times between August 3, 2007 and September 6, 2007, when it learned that St. Joseph's had closed due to bankruptcy. Although it did not have a beneficiary designation form, on September 10, 2007, Unum approved Ms. Merrimon's claim as the individual to whom the death benefit was payable in the absence of a beneficiary designation form.

On September 10, 2007, OSI mailed Ms. Merrimon a Welcome Kit which contained the same information and features as Mr. Mowery's kit. On November 13, 2007, Ms. Merrimon wrote out a single draft to herself in the amount of $51,036.34 and deposited that check into her personal checking account. On December 5, 2007, because the balance in Ms. Merrimon's RAA had fallen below $250, the Bank closed her account and sent her a treasurer's check in the remaining amount of $53.19. In total, Unum paid Ms. Merrimon $51,089.53, representing the full principal benefit plus $89.53 in interest.

C. How the RAAs Work

No funds are actually placed into the RAAs when they are initially opened. Instead, Unum retains and continues to invest the amounts due under the approved claims until a draft is presented to the Bank for payment. When a draft is presented for payment, funds sufficient to cover the draft are transferred from Unum's general accounts to the Bank.

Unum acknowledges that the RAAs it creates under these contracts bear interest at a rate selected by Unum or its agents, and that Unum and its agents retain the right to change the applicable interest rate. A committee at Unum meets periodically to recommend the interest rate that will apply to its RAAs. The rate is set by analyzing the interest rates used by banks for money market accounts and certificates of deposit as well as interest rates applied to RAAs created by other insurance companies. Since October 28, 2004, Unum has set the interest rate for its RAAs at 1%. Among the factors that Unum considered in setting and keeping this rate since 2004 were the rate at which beneficiaries would draw down their accounts to place the funds into higher-yield accounts (thus depriving Unum of the benefit of continuing to invest the funds backing the accounts), and whether higher interest rates on RAAs offered by other insurers would cause Unum to lose business. According to Unum's research, as of June, 2008 other insurers offered an average rate of about 2% on their RAAs, with some as high as 4%.

RAAs provide Unum an opportunity for earnings on the “interest spread,” which is the difference between the income Unum earns from investing the funds backing the RAAs and the amount of interest it pays to beneficiaries on these accounts. The creation of RAAs is also intended to give beneficiaries time to recover from their loss before...